End of Protected Status Could Devastate Remittance-Dependent Nations

Bananas, coffee, apparel manufacturing and tourism all generate significant foreign exchange for Haiti, El Salvador, Honduras and Nicaragua. But one of the biggest sources of income for these four countries has nothing to do with producing exports or providing services.

We’re talking about remittances — money family members living in the United States and elsewhere send back home. And a recent U.S. decision to terminate Temporary Protected Status (TPS) for Haiti, El Salvador, Nicaragua and possibly Honduras could devastate their fragile economies, warns a new study.

The Inter-American Dialogue, in an extensive report issued Jan. 24, details the likely consequences of an end to TPS for each of the countries affected.

The numbers don’t look encouraging.

The irony is that family remittances to Latin America and the Caribbean grew by over 8 percent from 2016 to 2017, exceeding $75 billion. This increase far exceeds the World Bank’s estimated 1.2 percent GDP growth.

In absolute numbers, the top recipient of remittances last year was Mexico, with $28.6 billion. But that accounts for just 2.7 percent of the Mexican economy. By contrast, family remittances make up 10.2 percent of Nicaraguan GDP, 19.5 percent of Honduran GDP and 33.6 percent of Haitian GDP.

Last year, Haitians living in the United States sent home $1.27 billion, roughly half of the $2.77 billion sent to Haiti worldwide. Other key sources of remittance money in 2017 came from Haitians living in the neighboring Dominican Republic, Canada, France and Chile.

“Every dollar counts in an economy that basically lives off migrants,” said Manuel Orozco, director of the Migration, Remittances and Development Program at the Inter-American Dialogue and author of the report. “One out of every three dollars comes from remittances, and you have a state that is nearly collapsing, with very little productive capacity outside of tourism or the free trade zones.”

Out of the 59,000 Haitians living in the U.S. under TPS, about 40,000 are wage-earners who send money home. Last year, Orozco estimates, those 40,000 Haitians sent back $84.9 million — a significant chunk of Haiti’s GDP.

“You’re talking about the loss of income in 40,000 households. If they were to return, it would be devastating,” Orozco told The Diplomat in a phone interview. “They’ve been outside of Haiti for years. They have no idea what the place looks like, and they have families here and have made lives here. So returning is not an option. And by changing their status from legal to undocumented means they’ll make 20 to 25 percent less, and they’ll lose insurance rights.”

This, he said, is why “most people on TPS probably won’t return to their countries — and in the case of Haitians, many have been going to Canada looking for asylum or refugee status. That might set a trend to move to other countries, which in itself is unsettling.”

In El Salvador’s case, the country’s 146,250 remitters under TPS sent home $628.9 million last year. This accounts for 12 percent of all transfers to El Salvador and is equal to 2 percent of the country’s GDP.

El Salvador was originally granted TPS in 2001 following two major earthquakes. The George W. Bush and Barack Obama administrations extended TPS for El Salvadorans several times, but the Trump administration said the original conditions under which TPS was granted in 2001 no longer exist. Critics counter, however, that these immigrants have planted deep roots in the U.S. and that El Salvador continues to be wracked by crime, drug violence and poverty — conditions that will ironically worsen if these TPS holders, who send significant funds to prop up their nation’s economy, return home.

“While for the most part migrants continue to remit like they did in previous years, their remitting behavior is now hampered by greater fears of deportation amid concerns about a remittance tax,” said Orozco, whose team surveyed 500 migrants in New York, Washington, Chicago, Houston and Los Angeles between March and August 2017. Among other things, the survey revealed that:

64 percent say that in the event of a tax on remittances, they'd change their sending behavior; of those, 41 percent would use informal services, and 26 percent would send less money.

55 percent believe the Trump administration may affect them through the deportation of people in their community, while 31 percent of respondents think they themselves may be deported.

60 percent don't expect any support from their home countries; only 8 percent think these governments may offer immigration assistance or seek to negotiate with the U.S. on their behalf.

In the event they get the chance to regularize their status through immigration reform, 55 percent said they'd be prepared to pay a fine, while 14 percent would agree to formalize their status and commit to return in five years.

22 percent said they migrated due to insecurity and violence in their home countries.

59 percent believe the new policies will make it harder for them to find jobs

Orozco, a native of Nicaragua, said that “in some countries like El Salvador, Honduras and Guatemala, remittances may be responsible for half of overall economic growth. Their increase in 2017 amounted to 50 to 78 percent of total growth in these three countries.”

El Salvador’s predicament is particularly cruel. In a just-released report, “Towards an Adjustment of Status for Salvadorans with TPS,” Orozco argues that providing legal permanent residency for these people is a “logical, humane and politically important and defensible” step.

“For 18 consecutive years, four administrations continued the TPS designation for Salvadorans. As a result of these extensions of TPS, Salvadorans have gradually set down roots in the United States,” he wrote. “Although they arrived with so-called temporary status, 18 years is a long time for anything to be temporary. Seeing the way that over 200,000 Salvadorans with TPS have built lives for themselves over the past two decades is a testament to their hard work and their commitment to core American values. Their time in the United States indicates that they have appreciated and taken advantage of the opportunities presented to them by TPS, and in doing so have fully integrated into American society.”

Among other things, the Salvadorans currently protected under TPS are for the most part hardworking and law-abiding. Nine out of 10 Salvadorans under TPS are in the labor force, and only 5 percent are unemployed.

Orozco argues that Salvadorans with TPS have “higher employment rates among women and higher earnings among men”and are firmly established in the American middle class, with median household incomes of $50,000 a year.

More significantly, he writes, “Salvadorans with TPS typically work in sectors that complement the U.S. labor force. For example, while 4 percent of the U.S. labor force works in construction, 22 percent of Salvadorans with TPS work in that sector. Similarly, while less than 1 percent of the general labor force works in housekeeping and cleaning, 20 percent of Salvadorans with TPS work in that sector. What is important to note here is that Salvadorans with TPS are complementing the U.S. labor force by filling in where needed, rather than competing with U.S. workers for jobs.

In addition, he said, 78 percent have a U.S. bank account (compared to 40 percent of undocumented migrants), while 36 percent have a home mortgage. “They are neither a burden nor financially vulnerable,” he concluded.

But ending TPS is going to particularly hurt cities with large Salvadoran immigrant populations, such as Los Angeles and Washington, D.C.

“As the U.S. economy continues to show steady growth, with unemployment at 4 percent, the disruption caused by a loss of 195,000 workers in the labor force would be significant,” he said. “Given the fact that Salvadoran TPS beneficiaries work in economic sectors different than those of native-born U.S. citizens, the loss of jobs will affect performance in construction and other services.”

Finally, says the report, ending TPS will be a “major blow” to El Salvador’s struggling economy, which has been weakened by natural disasters, gang violence and the drug trade.

“The return of Salvadorans with TPS would have dramatic impacts on the labor market of a country that is already economically fragile,” the report concluded. “El Salvador is a small country, with an estimated 4 million people in the labor market, and the return of some 230,000 workers amounts to nearly 6 percent of the labor force. Whether Salvadorans with TPS will be able to find jobs upon their return, or whether the jobs they find will displace other workers, remain troubling questions.”